Oil’s spectacular collapse deepened on Monday despite widening global efforts to fight the economic impact of coronavirus. Prices of the two key marker crudes, Brent and West Texas Intermedia slumped again with the US crude tumbling under $US30 a barrel.
It is clear now that oil is facing the most severe contraction in demand in history – how long this lasts for is simply unknown.
Australian energy stocks will cop another pounding today on the ASX after the S&P 200 Energy Sector slumped more than 13.4% yesterday.
The impact of the virus on global growth is being amplified by the deep price and volume war between Russia and Saudi Arabia.
Global benchmark Brent crude fell more than 12.5% after Saudi Aramco’s chief financial officer said the company is “very comfortable” with oil at $US30 a barrel.
Analysts say the virus is seeing demand for fuel plunging (especially for jet fuel) as a result of global restrictions to prevent the spread of the virus. US gasoline (petrol) futures fell to their lowest level since 2005.
Monday saw the two key futures contracts settle at their lowest levels since early 2016 as COVID-19 worries prevailed.
The steep falls on sharemarkets, especially in energy stocks also rattled the commodity markets.
That was despite emergency stimulus by the Federal Reserve and other central banks that was meant to ease the hit to the economy.
April West Texas Intermediate (WTI) oil fell $US3.03, or 9.6%, to settle $US28.70 a barrel in New York. That was the lowest front-month contract settlement since February 2016.
In Europe, May Brent dropped $US3.20, or 9.5%, to $US30.65 a barrel.
Analysts say that with the price premium between the two crudes narrowing to around $US2 a barrel, US crude is not competitive outside the US at the moment, which could see more falls.
Last week, WTI fell 23%, while Brent lost 25%—with both marking their biggest weekly percentage declines, based on the front-month contracts, since December 2008,
Oil prices have been under intense pressure on the supply side, as top exporter, Saudi Arabia expands output and slashed prices to increase sales to Asia and Europe and take on Russia (and US shale frackers).
Meanwhile, Comex gold futures fell Monday to settle at their lowest since December, and silver futures finished at their worst level in over a decade, as the Federal Reserve’s emergency decision to slash interest rates failed to stem losses in the stock market, sending traders scrambling for cash.
Gold had dropped more than 4% to hit the day’s low, and silver dropped by as much as 19%. Prices for both precious metals, however, managed to significantly cut their losses by settlement, as short-covering kicked in.
Gold for April delivery lost $US30.20, or 2%, to settle at $US1,486.50 an ounce – the lowest finish for a most-active contract since December 20 last year, according to FactSet data.
Prices had dropped by more than 4% from Friday’s settlement to touch an intraday low at $US1,450.90.
Comex May silver US tumbled $US1.684, or nearly 12%, to $US12.816 an ounce following an intraday low at $US11.77. Prices for the white metal ended at the lowest since July 2009.
Other metals dropped sharply with May copper down 2.9% at $US2.3925 a pound. April platinum shed almost 12% to $US657.70 an ounce, while June Palladium went against the trend, shook off early losses and rose 0.3% to $US1,514.10 an ounce.
